Roth IRA. Introduction

Transcription

1 roth ira

2 Roth IRA Introduction Since its beginnings more than 100 years ago, Pension Fund has supported others in their time of need. Pension Fund provides retirement, disability and death benefits, as well as other benefits to organizations affiliated with the Stone-Campbell Movement. As part of our mission, Pension Fund offers a Roth IRA (Individual Retirement Account). The Roth IRA is a versatile retirement savings option because it can be used during any phase of your professional career. Because this after-tax retirement savings program allows you to withdraw contributed funds at any time, it can be used for college savings, additional retirement savings or estate planning. It is not designed to be a primary retirement tool, but to supplement an individual s retirement goals. The Roth IRA was established by the Taxpayer Relief Act of 1997 and named for its chief legislative sponsor, William Roth. The Roth IRA is a great tool to use for retirement as a young church professional. With this savings program, I can begin saving early and allow my account to grow over time without having to worry about paying taxes when I retire. It s a great way to start saving early and defer the benefit to a tax-free distribution at retirement. New minister 2

3 Key Benefits The Roth IRA offers many benefits. Following are just a few: Competitive base interest rate Pension Fund s Roth IRA offers value of principal. In addition, the base interest rate of 3% to 6% makes it an attractive investment. The actual rate is set quarterly and compounded daily. Check for the most current rates. Tax advantages Other notable benefits of the Roth IRA are that earnings compound tax-free and withdrawals are tax-free in retirement. A related benefit is that beneficiaries are not required to pay taxes on the benefit received because taxes were paid at the time funds were deposited into the Roth IRA. Because there are no minimum distribution requirements for the participant in the Roth IRA, you may continue to let your funds grow in the account taxfree. Non-spousal beneficiaries are subject to required minimum distribution rules, however. Flexibility On contributions: Participants can continue to contribute to a Roth IRA after age 70½ if employed, as no age restrictions are associated with the Roth IRA. You can access funds any time, and you are 100% vested from the first day you contribute to the account. And while you may be subject to tax and penalties, you always have the option to withdraw your funds. On withdrawals or distributions: Distributions may be requested at any time; however, participants are never required during their lifetime to withdraw from their Roth IRA. The Roth IRA provides for several situations that are considered qualifying events to take a distribution. This is yet another example of the flexibility of the Roth IRA. To determine what are considered qualifying events, see Page 4, Distributions. On rollovers and deposits: You may be eligible to roll an active/current Roth IRA from another account into a Pension Fund Roth IRA, or from a traditional IRA into a Roth IRA. If you have an inactive Roth IRA (such as one established via a former employer), you can establish a Roth IRA with Pension Fund and make rollover (but not regular, ongoing) contributions to that account. Forms to complete a rollover can be found at Finally, in some circumstances, you may also deposit a taxable distribution from a Tax-Deferred Retirement Account into the Roth IRA after paying the required taxes. Good Experience Credits The Roth IRA is eligible for Good Experience Credits, providing the opportunity for extra earnings. Each year the Pension Fund Board of Directors reviews the reserves required for current and future benefits, as well as reserves needed for any potential market declines. When reserves exist above what are required, the Board of Directors may declare Good Experience Credits additional interest earnings for all participants. Good Experience Credits can make a significant difference when saving for retirement. 3

4 Roth IRA Eligibility and Application You are eligible to enroll in the Roth IRA if you have earned income and you are employed by an organization affiliated with the Stone-Campbell Movement. These organizations include, but are not limited to, congregations, wider ministries, seminaries, and universities and colleges associated with the Christian Church (Disciples of Christ), Christian Churches/ Churches of Christ, or Churches of Christ in the United States. Unlike the Pension Fund s Pension Plan and Tax- Deferred Retirement Account, which require employer participation, you may set up the Roth IRA account directly with Pension Fund. Your employer does not have to set up the account on your behalf. Eligible employees can send in their payment and enrollment form to open their account. To get started today, visit or call Pension Fund at Getting started: What else you need to know Distributions If your distribution is a qualified distribution, then both your contributions and the earnings on those contributions will be distributed to you tax-free. A qualified distribution is a distribution from a Roth IRA that is made after the end of the five-year period beginning with the first day of the year in which you made initial contribution to the Roth IRA, provided you have reached age 59 1 /2 and one of the following requirements is met: The distribution is made after you become disabled, You are the beneficiary of the deceased Roth IRA Owner, The distribution is for a first time home purchase (up to a $10,000 lifetime limit), The distribution is for medical expenses in excess of 7.5% of your adjusted gross income, It is for medical insurance premiums while you are unemployed, or It is for qualified higher education expenses. The Roth IRA allows me to continue to contribute to a retirement savings account even while I continue to serve as a university professor past traditional retirement age. This is a great way to supplement my existing retirement savings so that I will be better prepared for retirement at the end of my career. If your distribution is not a qualified distribution, the earnings that are distributed will be reported as taxable income in your adjusted gross income. University professor 4

5 As a mid-career professional, I have recently learned of the Roth IRA and found it will be a useful retirement tool for retirement savings. With the Roth IRA, I will be able to add the beneficiaries of my choice and they will not have to pay taxes on the funds when they receive them as a beneficiary. Current Roth IRA participant Limitation on Contributions IRS Code rules limit the total amount of regular contributions that may be made to a Roth IRA. For 2013 the dollar limit is $5,500. If you have reached age 50 (or will reach age 50 by the end of the calendar year), however, the dollar limit is $6,500. The IRS adjusts the dollar limit periodically for increases in the cost of living. Contributions made to all IRAs, whether traditional or Roth, are aggregated for purposes of this dollar limit. Therefore, any contribution you make to a traditional IRA or to another Roth IRA will reduce the contribution that you can make to Pension Fund s Roth IRA. Your contributions are not limited by participation in a retirement plan other than a traditional or Roth IRA. It is the participant s responsibility to ensure that contributions do not exceed the applicable limits. If regular contributions to a Roth IRA exceed the contribution limits, a 6% excise tax may apply to the portion of the contribution that is an excess contribution. This excise tax will apply each year that the excess contribution remains in your Roth IRA. If the participant withdraws an excess contribution along with any applicable earnings prior to the deadline for making Roth IRA contributions for the year (generally, by the April 15 following the end of the tax year), the excise tax will not apply. Income Limitations The maximum contribution may be further reduced depending on your modified adjusted gross income (AGI) and your tax filing status. For 2013, the AGI phaseout range for taxpayers making contributions to a Roth IRA is $178,000 to $188,000 for married couples filing jointly. For single individuals and heads of household, the income phase-out range is $112,000 to $127,000. Finally, regular contributions cannot exceed 100% of your compensation. For a complete explanation of limits and other information, visit and see Publication

6 Roth IRA For all life stages The Roth IRA is a beneficial option regardless of your life stage: just beginning to save, mid-career, or nearing retirement. If you have a young family with small children, you might want to consider using a Roth IRA to start a college savings fund or for a down payment on a house. If you are well into your career, you could use the Roth IRA for additional retirement savings. If you are closer to retirement, a Roth IRA could be used in estate planning. Consult your financial advisor to discuss your options. 6

7 About Pension Fund Participation in Pension Fund programs provides peace of mind that you are investing in an organization with more than 115 years of experience in managing financial assets. Our track record and financial strength are testimony that Pension Fund is Strong. Smart. Secure. It is our objective and practice to maintain excess reserves for all Pension Fund programs. Pension Fund is fully funded, which means we have more assets than benefit obligations and, from an actuarial standpoint, can pay all current and future retirement obligations. This strong reserve position allows us to weather market downturns, as well as provide financial underpinning to develop new programs to benefit our participants and participant organizations. Pension Fund has prudently managed assets for more than 115 years and has responded to changing needs of our members. We continue to introduce programs to supplement members existing retirement and pension savings. We measure our success by protecting and adding value for your retirement. In good times and bad, Pension Fund serves its members faithfully. In the history of Pension Fund, no participant has experienced a reduction in pension or pension credits, nor suffered any loss in value of his or her retirement account. To learn more about Pension Fund s full range of programs, visit Before making decisions about financial matters, please consult your attorney, tax preparer or other financial advisor to find out how these programs will impact your individual situation. If any differences exist between this summary and the Roth IRA document, the IRA document will control. 7

8 pensionfundchristianchurch Visit us on the web: Send us an 04/2013